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For the past 48 hours, the rest of Europe and, indeed, the rest of the world have watched Greece come unhinged.

In a speech shortly after midnight Friday night, prime minister Alexis Tspiras announced that instead of continuing negotiations between the Greek government and the Eurogroup of eurozone finance ministers, he would call off talks to hold a referendum next Sunday, July 5, thereby putting the question to the Greek people — will they accept the terms of the latest deal with Greece’s creditor institutions or will they reject it?

Greece’s voters have effected a political earthquake in making leftist Alexis Tspiras their new prime minister, delivering a near-majority to the far-left and giving the European Union its first full-throated anti-austerity government since the onset of the eurozone’s sovereign debt crisis in 2009-10.

Tsipras’s party, SYRIZA (the Coalition of the Radical Left — Συνασπισμός Ριζοσπαστικής Αριστεράς), is now the most left-wing governing party in the European Union and, with the exception of economist Yiannis Dragasakis, who served as deputy finance minister in a short-lived technocratic government a quarter-century ago, it’s a party with no significant governing experience.

Despite a 50-seat ‘winner’s bonus’ for SYRIZA, which significantly outpolled New Democracy, the party fell just short of an outright majority in Greece’s unicameral Hellenic Parliament (Βουλή των Ελλήνων). Earlier, today, however, Tsipras announced that he would form an alliance with the Independent Greeks (ANEL, Ανεξάρτητοι Έλληνες), an anti-austerity spinoff from New Democracy. Its leader, Panos Kammenos, last week scoffed that Europe is governed by ‘neo-Nazi Germans,’ and he is something of a loose cannon on the Greek political scene, and he has sometimes veered toward nationalist and even anti-Semitic rhetoric. Like Tsipras, he has brutally denounced the conditions of Greece’s two bailouts over the past half-decade, but he agrees on little else with the country’s new leftist prime minister.

With the Greek far left set to take power after Sunday’s staggering parliamentary elections, its next prime minister Alexis Tspiras will be just one of many key figures who will now become the central players in the latest chapter of the European Union’s economic policy debate.

After Tspiras, no one will be more important than the economic advisers to whom the new government will entrust its attempt to reverse Greek economic policy and to negotiate debt relief from skeptical European Union leaders and international bondholders.

Among the chief economic advisers to Tsipras and the soon-to-be-governing SYRIZA (the Coalition of the Radical Left, Συνασπισμός Ριζοσπαστικής Αριστεράς) are a handful of colorful personalities, from moderates to Marxists, all of whom will shape Greek economic policy in the years ahead.

Varoufakis: the political neophyte and telegenic economics professor

Yanis Varoufakis, an economics professor at the University of Athens, is widely tipped to become Greece’s next finance minister or, at the very least, lead the new government in negotiations with the troika — the European Central Bank, European Commission and the International Monetary Fund — and other EU leaders. Until very recently, Varoufakis was an outsider to Greek politics. He’s not a politician and, until recently, was a visiting professor at the University of Texas in Austin.

Varoufakis, however, was invited to run for a parliamentary seat by SYRIZA’s leaders. His international profile (Varoufakisis half Australian) and fluent English skills mean that he could soothe international markets as the chief economic spokesperson for Greece’s new government. A former adviser to George Papandreou in the early 2000s, Varoukakis has been a strident critic of the austerity measures that, first Papandreou and, since 2012, outgoing prime minister Antonis Samaras have accepted as conditions for Greece’s two bailouts, totaling €240 billion. In his announcement that he would stand as a candidate for the Hellenic Parliament, he compared that austerity to ‘fiscal waterboarding’:

Instead of discussing, in the European Union’s fora, the nature of our systemic crisis, the powers-that-be were busy fiscally waterboarding proud nations, letting them take a few short breaths before submerging them again into the waters of illiquidity.

With his sweeping victory today in Greece, Alexis Tspiras has led the far left to its only victory since his country’s return to democratic rule in 1974.

In so doing, Tsipras (pictured above) and the socialist SYRIZA (the Coalition of the Radical Left, Συνασπισμός Ριζοσπαστικής Αριστεράς) have upended the political order in a country that, for more than four decades, shifted between the rule of political elites on both the center-right and the center-left, often hailing from two or three dozen well-connected families. Tsipras’s victory today is as much the defeat of that Greek political elite on both the left and right, which cumulatively share responsibility for irresponsible budget policies and widespread corruption in government.

More recently, they have also shared responsibility for the Greek bailout that ceded significant control over Greek fiscal policy to the ‘troika’ of the International Monetary Fund, the European Central Bank and the European Commission. Center-left prime minister George Papandreou (himself the son of a prime minister) accepted the first bailout in his term, between 2009 and 2011. Since 2012, a grand coalition headed by center-right prime minister Antonis Samaras and center-left deputy prime minister Evangelos Venizelos, have also accepted the increasingly onerous demands of the troika in exchange for the funding that has floated Greece’s treasury since the eurozone crisis of 2010.

Tsipras, at age 40, emerged in the lead-up to the 2012 parliamentary elections, by consolidating support on the Greek left in his denunciations of the grinding course of austerity that accompanied Greece’s humiliating bailout. Then, Greece was only in its third consecutive year of recession and, remarkably, the unemployment rate was actually lower then (24.8%) than it is today (25.8%), with the country nominally back on the path to GDP growth.

But for all the smoke of the election campaign, and for all Tsipras’s fiery rhetoric, the reality is that Tsipras and SYRIZA have spent the past three years moderating their positions and preparing for the day when Tspiras would lead the next Greek government, which may prove more ‘pragmatic left’ than ‘radical left.’

In 2012, Tspiras was ambivalent (at best) about Greece’s eurozone membership. Today, however, Tspiras is adamant, along with a wide majority of the Greek electorate, that Greece must retain the single currency. Whereas SYRIZA once mused about defaulting on greek debt and ripping up the ‘memorandum’ of stipulations that governs the country’s two bailouts, which totals €240 billion, the party now pledges to renegotiate Greece’s debt burden with EU leaders in an orderly manner. Though Tspiras and other SYRIZA leaders are committed to reversing the grinding austerity of the past six years, they will seek to do so in the context of a balanced budget (as opposed to the 4% to 5% surplus that outgoing prime minister Antonis Samaras hoped to achieve).

Tsipras, in short, will govern more like a social democrat than a democratic socialist. As prime minister, with the full weight on government on his shoulders, Tspiras will be hard-pressed to deliver appreciable relief from six years of austerity, recession and unemployment. To devote more funding for public services and boost growth will require a very different skill set than the campaign oratory of the past three years. Continue reading EU should give Tsipras a chance to govern→

With the failure of Greece’s parliament to elect a president after a third and final vote this morning, prime minister Antonis Samaras will dissolve the parliament and schedule early elections — most likely on January 25.

It will be the first election since June 2012, when Samaras’s center-right New Democracy (Νέα Δημοκρατία) narrowly defeated the hard-left SYRIZA (the Coalition of the Radical Left — Συνασπισμός Ριζοσπαστικής Αριστεράς). According to just about every poll, SYRIZA holds a lead of between 3% and 7% against New Democracy.

Expect a tough Samaras-Tsipras fight for first place

Samaras is a wily and seasoned campaigner, and he will undoubtedly cast himself as the guardian of Greece’s long-term stability. On Monday morning, he was lashing out at ‘political terrorism,’ and warning that a SYRIZA victory would allow Greece’s sacrifices to go to waste. SYRIZA will face sustained criticism — some justified, some overblown — from just about every quarter in Europe that it and its leader, Alexis Tspiras, are dangerous ideologues whose policies could force Greece out of the eurozone in 2015. Already, publications like The Guardian are referring to Greece being ‘plunged into crisis.’ Expect the fear-mongering about the consequences of a SYRIZA victory to be on par with efforts by the British political establishment and business community in the fraught week leading up to the Scottish independence referendum. It’s by no means certain that SYRIZA’s narrow single-digit lead will survive that kind of onslaught.

The fight between SYRIZA and New Democracy is so important because the first-place finisher in the election will not only win the largest share of seats in the 300-member Hellenic Parliament (Βουλή των Ελλήνων), but also a 50-seat ‘bonus’ meant to provide the winning party with enough seats to form a working majority government. Over the next few days, it will be worth watching to see whether SYRIZA or New Democracy convince any other smaller parties to merge, because the marginal value of even a one-vote victory in Greek elections is so consequential.

Since 2012, Greek economic conditions are slightly improved. Greece’s GDP is set to grow by between 1.0% and 1.4% in 2014, following six consecutive years of contraction, and there’s every reason to believe it will continue to expand in 2015. The government even attempted a reasonably successful bond sale in April, and Greece’s staggering unemployment rate is now just 25.7%, down from its high of 28%.

Nevertheless, the dual cuts of budget austerity and economic depression have, understandably perhaps, left the Greek electorate weary of renewing a mandate for austerity, and the uncertainty over the country’s political future has pushed 10-year bond yields to an unsustainable 8.5%.

Greece’s ‘bailout’ questions remain unsolved

Fueling that uncertainty is Greece’s planned exit from its bailout program in February 2015, just days after the election.

In the second of three presidential votes, the Greek parliament failed to elect the government’s center-right choice for president, Stavros Dimas (pictured above), a former foreign minister and European Commission member, in voting on Tuesday.

Though it was the second time that Greek prime minister Antonis Samaras, both failures were expected, given that Dimas needed 200 votes in the 300-member Hellenic Parliament (Βουλή των Ελλήνων) in order to win the presidency outright in either of the first two rounds. That threshold drops to just 180 votes in the third and final round that will take place next Monday, December 29. Samaras is waging an all-out campaign over the weekend to convince enough legislators to support Dimas and, by extension, his government.

Dimas won just 160 votes in the first round, but Samaras, who governs a coalition that includes his own center-right New Democracy (Νέα Δημοκρατία) and its traditional center-left rival, PASOK (Panhellenic Socialist Movement – Πανελλήνιο Σοσιαλιστικό Κίνημα), increased that total to 168 in the second vote after winning over a handful of independents.

If the Hellenic Parliament fails to elect a new president, Greece will hold snap elections next spring and New Democracy might lose, as polls currently suggest, to the hard-left SYRIZA (the Coalition of the Radical Left — Συνασπισμός Ριζοσπαστικής Αριστεράς). That could put Greece’s financial future in doubt as SYRIZA’s leader, Alexis Tsipras, pledges to reverse the austerity measures of the past six years and negotiate a bond haircut to lower the country’s debt burden, from the ‘troika’ of the European Commission, the European Central Bank and the International Monetary Fund that provided Greece two bailouts worth €110 billion and €130 billion, starting in June 2010.

Samaras starts with the existing ND-PASOK governing coalition, which controls 155 votes, there’s a theoretical bank of 46 additional votes, including 24 independents, 12 legislators from Panos Kammenos’s Independent Greeks (ANEL, Ανεξάρτητοι Έλληνες), an anti-austerity spinoff from New Democracy and 10 additional legislators from the Democratic Left (DIMAR, Δημοκρατική Αριστερά), a new social democratic party and SYRIZA spinoff that joined Samaras’s coalition between the June 2012 elections and June 2013 (when it eventually withdrew to the opposition in the face of further austerity measures). Though DIMAR leader Fotis Kouvelis has indicated he will support SYRIZA’s call for early elections and will support a SYRIZA-led government, not all of the party’s members agree. Negotiations with the Independent Greeks have been equally tenuous, and one of its members accused the government of attempting to bribe him in exchange for his support in the presidential vote.

Snap elections would coincide with the end of Greece’s bailout program in February 2015. The the next Greek government already faces a €22 billion budget shortfall between 2015 and 2016. Among the solutions currently under discussion is a short-term credit line from the troika or the IMF, though the troika is already demanding additional wage cuts and other fiscal contraction as part of the deal. Another potential solution might be to extend the repayment period by 20 years, equivalent to writing off around €50 billion in debt. Continue reading Greek parliament prepares for 3rd and final presidential vote→

In allowing its banks to fail, neo-Keynesian economists have argued, Iceland avoided the fate of Ireland, which nationalized its banks and now faces a future with a very large public debt. By devaluing its currency, the krónur, Iceland avoided the fate of countries like Estonia and others in southern Europe trapped in the eurozone and a one-size-fits all monetary policy, allowing for a rapid return to economic growth and rapidly falling unemployment. Neoclassical economists counter that Iceland’s currency controls mean that it’s still essentially shut out from foreign investment, and the accompanying inflation has eroded many of the gains of Iceland’s return to GDP growth and, besides, Iceland’s households are still struggling under mortgage and other debt instruments that are linked to inflation or denominated in foreign currencies.

Elections are rarely won on the slogan, ‘it could have been worse.’ Just ask U.S. president Barack Obama, whose efforts to implement $800 billion in stimulus programs in his first term in office went barely mentioned in his 2012 reelection campaign.

Iceland, as it turns out, is hardly so different at all — and it’s now virtually a case study in an electoral pattern that’s become increasingly pronounced in Europe that began when the 2008 global financial crisis took hold, through the 2010 sovereign debt crisis in the eurozone and through the current European-wide recession that’s seen unemployment rise to the sharpest levels in decades.

Call it the European three-step.

In the first step, a center-right government, like the one led by Sjálfstæðisflokkurinn (Independence Party) in Iceland in 2008, took the blame for the initial crisis.

In the second step, a center-left government, like the one led by Jóhanna Sigurðardóttir and the Samfylkingin (Social Democratic Alliance) in Iceland, replaced it, only to find that it would be forced to implement harsh austerity measures, including budget cuts, tax increases and, in Iceland’s case, even more extreme measures, such as currency controls and inflation-inducing devaluations. That leads to further voter disenchantment, now with the center-left.

The third step is the return of the initial center-right party (or parties) to power, as the Independence Party and their traditional allies, the Framsóknarflokkurinn (Progressive Party) will do following Iceland’s latest election, at the expense of the more newly discredited center-left. In addition, with both the mainstream center-left and center-right now associated with economic pain, there’s increasing support for new parties, some of them merely protest vehicles and others sometimes more radical, on both the left and the right. In Iceland, that means that two new parties, Björt framtíð (Bright Future) and the Píratar (Pirate Party of Iceland) will now hold one-seventh of the seats in Iceland’s Alþingi.

This is essentially what happened last year in Greece, too. In the first step, Kostas Karamanlis and the center-right New Democracy (Νέα Δημοκρατία) initially took the blame for the initial financial crisis. In the second step, George Papandreou and the center-left PASOK (Panhellenic Socialist Movement – Πανελλήνιο Σοσιαλιστικό Κίνημα) overwhelming won the October 2009 elections, only to find itself forced to accept a bailout deal with the European Commission, the European Central Bank and the International Monetary Fund. In the third step, after two grueling rounds of election, Antonis Samaras and New Democracy returned to power in June 2012.

By that time, however, PASOK was so compromised that it was essentially forced into a minor subsidiary role supporting Samaras’s center-right, pro-bailout government. A more radical leftist force, SYRIZA (the Coalition of the Radical Left — Συνασπισμός Ριζοσπαστικής Αριστεράς), led by the young, charismatic Alexis Tsipras, now vies for the lead routinely in polls, and on the far right, the noxious neo-nazi Golden Dawn (Χρυσή Αυγή) now attracts a small, but significant enough portion of the Greek electorate to put it in third place.

The process seems well under way in other countries, too. In France, for example, center-right president Nicolas Sarkozy lost reelection in May 2012 amid great hopes for the incoming Parti socialiste (PS, Socialist Party) administration of François Hollande, but his popularity is sinking to ever lower levels as France trudges through its own austerity, and polls show Sarkozy would now lead Hollande if another presidential election were held today.

Although Greek elections have only this week been set for May 6, speculation is already rising that the vote will result in no viable coalition.

The two traditional parties of Greek politics since 1974 have been the center-right’s New Democracy (Νέα Δημοκρατία) and the center-left’s Panhellenic Socialist Movement (Πανελλήνιο Σοσιαλιστικό Κίνημα), or PASOK. But polls leading up to the legislative elections, however, show that the Greek two-party system appears to have all but broken down in the face of voter disgust with both New Democracy and PASOK, which both supported the ‘troika’ bailout from the European Central Bank, the European Commission and the International Monetary Fund, along with the accompanying reforms and budget cuts, none of which has been popular among Greek voters, to put it mildly.

Polls also suggest that no single party commands much over 20% in support and accordingly, up to nine discrete political parties could enter the Hellenic Parliament after May 6. That includes New Democracy and PASOK, but also KKE (the Greek Communist Party), SYRIZA (the Coalition of the Radical Left), the Democratic Left, the Ecologist Greens, the Independent Greeks (a center-right anti-austerity group), Golden Dawn (a neo-fascist, neo-nazi party) and LAOS (a right-wing Orthodox party) — the Greek electoral process provides that any party with over 3% of the national vote will be represented with seats.

Under the Greek election system, which will be conducted under a new 2007 electoral law, 250 of the 300 seats in the Hellenic Parliament will be awarded on the basis of proportional representation (only if the national tally exceeds 3% of the total vote, however). The additional 50 seats will be awarded to the party that wins the leading number of votes.

Both PASOK and New Democracy support the current round of bailouts from the ‘troika’ of the European Central Bank, the European Commission and the International Monetary Fund, including regulatory reforms and controversial austerity measures that have led to widespread cuts in public spending, strong disapproval from the Greek electorate and have helped stall Greek GDP growth. Together, PASOK and New Democracy approved the appointment of current prime minister Lucas Papademos, who succeeded former PASOK prime minister George Papandreou (who will nonetheless be standing for election on May 6 in Achaia).

Accordingly, both PASOK and New Democracy are at near-record levels of unpopularity heading into the May 6 election.

The latest poll from Public Issue, however, shows New Democracy with just 19% support and PASOK with 14.5%, which is too little to form a coalition — any party (or parties) need to win between 36% and 39% of the total vote to command enough seats to govern. Taken together, the 33.5% represents the lowest total of the two of any poll to date.

Nonetheless, at least four anti-bailout parties have also emerged with anywhere between 8% and 12% of the vote, making it likely that both ND and PASOK will receive traditionally lower support than ever. The KKE, Greece’s longtime Communist Party, wins 11%, SYRIZA, a coalition of the Radical Left no longer associated with the KKE, wins 13%, DIMAR — the “Democratic Left,” a splinter group from SYRIZA, wins 12%. Meanwhile, the Independent Greeks, an anti-austerity group that splintered from New Democracy, also wins 11%. The neo-fascist Golden Dawn polled 5% and each of the Ecologist Greens and the right-wing Popular Orthodox Rally polled 3%.

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Yannis Koutsomitis (follow him on Twitter @YanniKouts for all matters Greek) directs us to this profile of Evangelos Venizelos today, who’s the newly elected leader of the center-left Pasok party in Greece in advance of elections this spring.

The profile provides some background on the long-time rivalry between Venizelos and former prime minister George Papandreou:

Venizelos’ ill-fated challenge to Papandreou for the Pasok leadership in 2007, after Pasok was defeated by New Democracy, opened the long, winding road to the March 18 party leadership elections.

That the two men disliked each other deeply was plainly apparent, if for nothing else because of Venizelos’ withering criticism in 2007 of Papandreou’s intellectual and political capabilities. Venizelos seemed to view Papandreou – whose father and Pasok founder Andreas Papandreou had launched the minister’s career by appointing him government spokesman – as the princely dauphin whose hereditary right to the throne blocked his own great ambitions.

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Evangelos Venizelos, formerly the beleaguered finance minister of what remains of the Greek government, fresh off a negotiation of Greece’s second bailout (including an orderly debt writedown deal with private creditors), won the uncontested leadership of Greece’s main center-left party Sunday, in advance of legislative elections expected to occur in late April or early May.

Although he had only served as finance minister since June 2011, Venizelos quickly became battle-tested in having faced down the “troika” of the International Monetary Fund, the European Commission and the European Central Bank. If you can negotiate against Angela Merkel, Christine Lagarde and who-knows-how-many creditors, and you can emerge with Greece remaining intact, however delicately, perhaps you have a decent shot are rehabilitating the Panhellenic Socialist Movement (Πανελλήνιο Σοσιαλιστικό Κίνημα), or “PASOK” (ΠΑΣΟΚ in Greek).

A new poll today shows PASOK with just 12.5% support (down from the 44% it received in the 2009 elections), and Greece’s center-right New Democracy party (Νέα Δημοκρατία) with just 22.5% support (down from 33.5% that it received in the 2009 elections).

Former minister of culture Antonis Samaris will lead New Democracy into the election, which will be only the second Greek election that neither a Papandreou nor a Karamanlis will lead one of the major parties, at least since Greece returned to democracy in 1974.

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Suffragio attempts to bring thoughtful analysis to the political, economic and other policy issues that are central to countries outside of the US -- to make world politics less foreign to the US audience. Suffragio focuses, in particular, on those countries and regions with upcoming or recent elections.